Buy Now - Pay Later - What could go wrong? Well...
Showing my age, when I was a teenager, if I wanted to buy something, I needed cash, or I could do this thing called 'lay-buy'. You found your item and the shop put it aside and you made regular payments. When you had paid it off, you got to take the item home and enjoy it. I purchased many items (clothes, music) by this method.
Then came credit cards, debit cards, and now the 'retail phenomenon' of 'Buy Now - Pay Later'. This fits in with the world of instant gratification that we live in, get your item now and pay it off later. The precursor to this was something like the Q Card, where big box furniture retails allowed you to purchase items and pay zero interest. Which all worked fine as long as you paid it off before all the penalty interest rates kicked in. These Q Cards then spread to many other retailers.
Buy Now - Pay Later is unregulated and retailers are 'loving it' according to Newsroom. The two key companies in New Zealand are Laybuy (using the old fashioned term but giving it another meaning') and Afterpay.
According to NZ Post's report, 'its the credit choice for the young' and as of June last year in Australia there were 56,000 retailers signed up to these agreements with more than 6.1 million open accounts.
Although there is no interest payable, as the Newsroom investigation shows, there are hefty late payment fees, which is where the lenders make all their money and 20% of Buy now pay later users missed a payment in the last 12 months, according to the November ASIC report - which created over $43 million in missed payment fee review.
We strongly recommend that you skim read at least, the full investigation article from Newsroom that you can find here, and warn the younger people in your lives of these risks.